NWROI - Brandon Turner's Equation
Does anyone remember when Brandon Turner used NWROI in his house hacking book? I am curious about how he comes up with the number. . . . the formula goes
- NWROI = (cash flow & rent savings + loan paydown + appreciation)/ Initial Investment
So, if you have a low initial investment - it looks good on paper. It is a favorable equation b/c you get to include rent savings & loan paydown
However, I do not understand how you can use loan paydown for the equation. I get that it's the equity you are getting in the house (you only can include the principal you are paying down) - but that feels as if it should be included as a part of your investment. If you are going to say your loan down part of your return for your net worth -- it should also be discounted, considering it is money leaving your pocket.